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Comment by christiangenco | Hacker News Reader

I'm surprised to see Paypal only uses 0.26 TWh/yr (compared to Bitcoin's 200 TWh/yr and Ethereum's 112 TWh/yr) which includes their offices and data centers[1].

I've heard the argument that if you take into account all the human-associated energy costs Bitcoin's energy use compared to a company like Visa would be comparable. Now I'm not so sure.

Notably this 0.26 TWh/yr number doesn't include things like the energy used by each human to drive to and from work or the amount of energy needed to make the food that fed them that year but now we're getting into some anti-human territory.

Perhaps the goal shouldn't be to minimize energy use but to maximize energy output.

1. https://app.impaakt.com/analyses/paypal-consumed-264100-mwh-...

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You shouldn't be so surprised. The energy consumption issues of cryptocurrency are very well-known, and the claims that "you didn't take into account all the human office staff" were attempts to deflect discussion from this energy consumption, almost certainly made by nobody who ever attempted to crunch any numbers. (The last time I tried crunched the numbers, I noted that Bitcoin uses more energy than the US mint making literal physical currency in industrial processes, and that was with heavy overestimation of the energy consumption of the latter.)

Believing that taking into account human-associated energy costs would put them on rough parity would require assuming that computers take up 1/1000th the total energy costs. And that's before you actually look at how many human jobs would actually disappear were cryptocurrency to magically replace the financial industry.

> I noted that Bitcoin uses more energy than the US mint making literal physical currency in industrial processes

That is a red herring, as what secures the U.S. dollar is much more than individuals eye testing physical currency.

Minting is probably the least energy intensive part of maintaining a fiat currency since paper is cheap. There is an enormous enforcement apparatus that goes into going after counterfeiting, keeping the mints incredibly secure, armored trucks to carry bills to destinations, etc.

Why is it surprising?

Paypal and any other company is interested in efficiency. Servers, air conditioning and power all cost quite serious amounts of money. UPSes and backup generators have to be sized for the load. Bringing large amounts of power into a building is also non-trivial. All of this means that most companies want to be reasonably efficient.

If Paypal found that their needs are covered by half the servers, leading to shutting down half their datacenters, they'd be quite happy about it. Plus less wages to pay!

Proof of Work on the other hand intrinsically wastes power. If somebody made a 2X more efficient ASIC/GPU, that'd mean that mining is now cheaper, which means you can do twice of it, which means that quickly everyone scales up and power usage remains the same.

Explain how PoW 'wastes' energy, if it is not sustainable to use high demand energy to mine. Miners who use 'free' or cheap energy, indicating low demand, will always out compete those attempting to use retail energy to fuel mining. Excess and stranded energy are the only sensible, sustainable sources for hashrate based mining. I use 'sustainable' in the context of mining operations, not globally or abstractly.

Efficiency is the ratio between what you spend, and the useful output you obtain.

The output we want from a blockchain is capacity to do work, that is transactions.

PoW means you're burning more and more energy, while the amount of work the network remains constant, because none of that energy actually results in more useful work being done. Thus the efficiency of PoW chains goes down and down and down.

Well its my personal opinion that washing machines are useless, so obviously they do nothing but waste energy. Please level up your argument and put a bit of effort into good faith.

No part of his response is opinion. Proof of work adjusts the difficulty of mining (literally search "proof of work difficulty") so that the number of transactions processed in any unit of time is roughly constant regardless of the amount of energy going into the system. Transactions processed are useful work. The energy going in does not increase the amount of work produced. This is why crypto holds value (if you believe in it): a finite amount of reward is produced per unit of time, but the material cost of producing that reward increases over time as the system expands. You need to spend more resources to mine more cryptocurrency because the algorithm makes it less likely for you to be rewarded as more people do more mining.

Correspondingly, if I buy a washing machine, I can do one load of laundry per hour. If I buy a second, I can do two loads per hour at the expense of more water and electricity. If washing machines were powered by proof of work, adding more washers and using more water and power wouldn't increase the number of loads I can wash per hour. The algorithm would see that too many loads are being done per hour and decrease the efficiency of each washer to compensate.

People working on crypto also drive around and do things? Which would make the crypto numbers equally larger. It would presumably take as many humans to run a kind of crypto-Visa as it would take to run regular Visa. Crypto isn't somehow automating some human-intensive activity. The big numbers on crypto is just the algo costs. So your whole argument is kind of terrible?

> Notably this 0.26 TWh/yr number doesn't include things like the energy used by each human to drive to and from work or the amount of energy needed to make the food that fed them that year but now we're getting into some anti-human territory.

Surely the crypto numbers don't include the same figures for folks working on all of the Ethereum infrastructure. PayPal employs 31000 people. Surely there are more people globally working on Ethereum (in mining facilities, writing code, etc).

If most of Paypal/Visa's employees commute into the office? I imagine the energy consumption is quite a bit higher.

If they work from home? How would you even measure this energy? They have to power their home and feed themselves so that they can do their job to keep the system running. Is that taken into account?

Why would you be surprised by that? The incentives for any normal company are to minimise energy use; energy is expensive. The incentives for most cryptononsense instead point to wasting as much energy as possible; that is literally how proof of “work” (waste, really) works.

> I've heard the argument that if you take into account all the human-associated energy costs Bitcoin's energy use compared to a company like Visa would be comparable. Now I'm not so sure.

The amount of misinformation around crypto energy usage has been out of control in the past few years. It's still weird to dip into an HN comment section and see people spreading the false claim that mining is powered by renewable energy sources that would otherwise go to waste (an absurd claim on every level) or that Bitcoin is somehow a "store of energy". The extreme energy inefficiency of cryptocurrencies is well-documented and doesn't even come close to any other financial system.

> Perhaps the goal shouldn't be to minimize energy use but to maximize energy output.

The real goal is to minimize harmful emissions. If we had some hypothetical infinite clean energy source then mining wouldn't be a big deal. However, even when mining is colocated with renewable energy sources, that renewable energy is prevented from going into the grid and offsetting fossil-fuel power plants.

> that renewable energy is prevented from going into the grid and offsetting fossil-fuel power plants

I’m not sure that’s how energy markets work… do you have any further reading? I’ve heard generally miners buy the cheapest electricity possible—typically oversupply that would otherwise be curtailed.

I don’t understand why Bitcoin mining is incompatible with emissions reduction. It sounds like an additional source of demand may make economical plants that otherwise could not be built.

> I don’t understand why Bitcoin mining is incompatible with emissions reduction. It sounds like an additional source of demand may make economical plants that otherwise could not be built.

Some years ago, there was a book published where the author systematically looked at the energy consumption (not just the of the UK and compared it to the total possible renewable energy sources therein. He found that even if you covered every hectare of the UK with solar panels, sent every raindrop through hydro power plants to extract energy as it runs to the sea, etc., it still would not provide enough renewable energy to satisfy UK consumption.

Switching existing energy sources to renewable isn't sufficient to avoid climate change; we need to reduce aggregate energy consumption. And that means that Bitcoin mining, adding a massive energy sink where one did not previously exist, is doing the exact opposite of what needs to be done.

You might be referring to David Mackay's excellent 2008 book Sustainable Energy – Without the Hot Air - https://www.withouthotair.com

In the book he tries to determine if renewables could support UK's energy needs. He estimated the UK consumes about 195 kWh per day per person (food, transporation, heating, miltary defense, ...)

If the UK massively invested in all the renewable options it stacked up to 180 kWh per day per person (obviously he provided lots of caveats).

His assumption on Solar PV was covering 5% of the UK land with 10% efficient PVs (about 200m2 per person). He estimated that could contribute 50kWh/d/p.

In the 14 years since the book was published it seems like Solar PV efficiency is now commonly 17-19%. So might only need to use 2.5% of the land.

And while it might be true of a densely populated and cloudy country like the UK, so what? As long as you can solve long-distance energy transmission from countries that don't have that problem (Spain would come to mind as somewhere close, Northern Africa would be the next option), there's far more energy provided via renewable sources that human kind will be using for some centuries yet (by which time we should finally have fusion licked).

They don't only buy oversupply, because energy isn't their only cost. They also have very expensive equipment that turns obsolete in a couple years. If the keep it turned off half the time, then they effectively double their equipment cost.

The thing that the "oversupply" can go into a PSPS, or you can just turn off pulsed coal or oil production facilities (if you have a national leadership over energy production and distribution, it won't work in Texas)

It's not fair to just say [financial institutions power consumption] vs bitcoin as financial institutions do not protect their assets. Governments with militaries protect the fiat assets and the power consumption of a military strength necessary to stabilize a fiat currency might be substantial.

But, governments with militaries also protect crypto assets. Like when the DOJ went after Frosties founders, or more recently, SK and Do Kwon. There's also the CFTC and the SEC fighting over who will regulate the space.

Even the most charitable argument, that crypto-relieved folks are trying to get governments involved.

Ignore all your examples, they are completely irrelevant, centrally controlled assets that operate on a layer that gives the option of decentralized control.

Bitcoin can perform without a government - the involvement desired by some people is not at all, nor is it claimed to be, or understood by anyone but you, to be necessary to the healthy functioning of Bitcoin or other sufficiently decentralized open protocols.

Of course, that's why it's muddy on how you should compare the energy costs. Bitcoins energy costs are 99.9% related to protecting the asset, they are not related to the functionality of the system.

Likewise financial systems have little to do with protecting fiat, banks are backed by governments businesses like paypal hold money in banks, etc.

So to compare bitcoins energy consumption to an entity that spend energy in an unrelated way isn't entirely fair - there is some merit there, but not much.

Visa and Paypal's energy use to secure their transaction records and assets from cyberattack is included in their much smaller energy use though; the fact they do so in a more energy efficient manner doesn't make the comparison unfair.

Bitcoin's energy use contributes no more towards preventing armed antagonists destroying or seizing assets, harming their economic value by destroying the underlying economy or compromising the network by seizing ASIC farms than Visa's. Bitcoiners outsource that bit to governments too.

Read his comment as Bitcoin specifically not crypto generically.

That protection applies to the people and other assets, too...

What do you mean "fiat assets"?

I mean that fiat is always issues by a central authority. To be a trusted/stable central authority you need power, which is usually represented by military strength (either your own or the strength of your allies).

You do not get stable fiat without a trusted central authority and you do not get a trusted central authority without military power.

Do you mean that private property is enforced by violence? How else do you expect to enforce it?

By the way, bitcoin is also "fiat", in the sense that it isn't backed by anything (this is what "fiat" means).

> By the way, bitcoin is also "fiat", in the sense that it isn't backed by anything (this is what "fiat" means).

That's not what fiat means in any sense. It has latin origins for "let it be done" which is to say that it is a decree by an authoritative actor.

But both bitcoin and fiat are backed by something - bitcoin is backed by a lot of energy consumption and fiat is backed by government authority.

> Do you mean that private property is enforced by violence? How else do you expect to enforce it?

I don't expect it to be enforced any other way, I didn't mean to give the impression that bitcoin was somehow free from the necessity of enforcing private property. However, bitcoin is different in that you only need to protect people and the network, with fiat you have much more to protect, such as political positions of power and physical buildings like fort knox.

No, a fiat currency is one that isn't backed by anything (as opposed to commodity money, which is itself a commodity, or fiduciary money which is redeemable for a commodity). For example:

The OLG models with money attribute to fiat money two basic characteristics: (a) it is intrinsically useless – that is, it cannot be directly used in production or consumption 3 – and (b) it is inconvertible 4 – that is, the issuer does not give a commitment to redeem it into commodities.

Handa, J. (2008). Monetary economics. Routledge. (p. 719)

Bitcoin is a fiat currency, just like the US dollar. And you're also wrong that with bitcoin "you only have to protect people and the network". What? Bitcoin itself can't be consumed (because it's fiat, remember), therefore it's worthless unless it can be exchanged for goods and services that can be consumed, which means these goods and services also need to be protected.

I understand your position, but saying something is "backed by nothing" is much different than saying something is "intrinsically useless and lacks commitment for conversion".

Both bitcoin and USD (as an example of traditional fiat) are absolutely backed by something - they are backed by quite a large economy, for one.

I'm not sure if you intentionally left this out, but following your quote literally just one sentence further you get:

> Further, it is assumed that fiat money is costless to produce, to store and to transfer, and does not pay interest to the holder

Which is quite obviously not a definition that fits bitcoin.

The term backing has a very precise meaning. It means the issuer of the currency promises to redeem the currency for a certain amount of a commodity. When people say "Tethers are backed by dollars" they mean that, i.e., that Tether Inc. promises to redeem Tethers for one dollar each. While it's true that the value of a US dollar is related (in a non-trivial way) to the output of the US economy, this doesn't mean that the dollar is backed by the US economy. The issuer of US dollars is under no obligation to redeem the dollars, and therefore it's right to say the US dollar isn't backed by anything.

> I'm not sure if you intentionally left this out, but following your quote literally just one sentence further you get

It says that these economic models assume fiat money costs nothing to produce, which is not accurate, because it does cost money. However, the production cost is not relevant for the purposes of these models, and therefore they can make this simplification and assume that it costs nothing.

> The term backing has a very precise meaning.

It definitely doesn't, at least not the way you're suggesting - you can find article after article talking about oil backed USD. Further, you can find plenty of definitions for the gold standard that don't use the word "backed" because it's not a precise term.

> It says that these economic models assume fiat money costs nothing to produce

You can either use this models parameters as a definition for fiat or as simply parameters for the model, you don't get to pick and choose only the parts that support your argument while ignoring the parts that explicitly don't.

It has a precise meaning. I've just told you what that meaning is. I'm an economist and I know the language of economics.

Regarding your other point, I'm not sure what you're trying to say. Are you saying that the dollar is not fiat money because it costs something to produce?

To be honest, I don't care. I have nothing else to add to this conversation, therefore I'm out.

> How else do you expect to enforce it?

The protection of private property without violence may be considered the innovation behind Bitcoin. Big deal.

Bitcoin doesn't protect private property.

Perhaps not literally. It certainly doesn't summon automated turrets in meat space. Good luck confiscating properly digitized reserves.

Sure, except that enforcing property rights hinges on the ability to confiscate the stolen or misappropriated assets. The harder the assets are to confiscate, the harder it is to enforce ownership of those assets.

Debt is backed by something. Currency is debt to its issuer, and it used to be backed by gold. Fiat currency is debt, but it's not backed by anything.

Gold and bitcoin aren't debt, they're assets. You could issue bank notes backed by gold or bitcoin.

Fiat currency is not debt.

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